Get saving for retirement

BIO

Anna is a business writer. During her 20-year Hong Kong career, she’s written everything from stock market reports and luxury goods sector analysis to speeches for the HKSAR Chief Executive and served as president of the Foreign Correspondents’ Club for two years.

It’s not looking good for Asia’s retirees, according to HSBC. They face eight years of hardship after their savings run out, according to the bank’s Future of Retirement Survey 2013. And many oldies expect to fund their twilight years with savings, the bank finds. Now banks really hate that. No chargeable fees there.

And property cost is the most important life event affecting saving ability, they discover. No surprises there. And then the amazing revelation that over 60% of respondents who took professional financial advice saved more. More than what?

But apart from the clear inference that people who take professional advice do better than those listening to their own advice – this report is interesting. Alarmingly, Asians expect their retirement savings to last only 10 years, and run out about halfway through their expected 18 years of retirement.

The 15,000 surveyed people in 15 markets worldwide included Australia, China, Hong Kong, India, Malaysia, Singapore and Taiwan. The savings may be eaten up by life events and inflation and everything costs more than you expect is hardly news, but the interesting part is how much people think they need versus the real cost of living.

Asian respondents estimate they need nearly US$40,000 (HK$310,000) per year for a comfortable retirement, slightly higher than the global average of around US$35,000 (HK$270,000). The proportion of “working age” income required for retirement varies in Asia compared to the global average of 78%, 98% in India, 83% in Taiwan and Hong Kong, 81% in Malaysia, 75% in China, and 66% in Australia and Singapore.

Actually lots of people don’t intend to retire at all. ”Continuing to work to some extent” is among the top three aspirations cited by Indian and Singaporean respondents. Louisa Cheang, Group General Manager, Regional Head of Retail Banking and Wealth Management, Asia-Pacific, HSBC, said: “The survey shows….a clear gap between how much people are saving and how much they require maintaining their living standards in retirement. Shifting economic and social trends requires people to think differently about retirement and prepare for the unexpected.”

Source: Bloomberg, based on conversion rates as of 21 February 2013. On that basis, it costs twice as much to retire in Hong Kong as it does in China.

Obstacles to Saving

Across Asia, people started to save at 27 years old on average and started to plan for retirement at 29. That’s very prudent of them, even so by the time they retire, most expect to fund their retirement from cash savings, ranging from 21% to 34% across five markets except in Australia and China, where respondents think they can rely more on state pensions.

Ms Cheang doesn’t like this. “An over-reliance on cash savings may increase the risk of a retirement income shortfall amidst today’s extremely low interest environment. Moreover, inflation in emerging markets also remains a real threat to bridge retirement income gap.”

Planning early and taking professional advice lead to increased savings, the bank survey finds, not surprisingly.

But most Asians (74%) have the courage of their own convictions and take a self-directed approach in planning, using their own knowledge and calculations. However, the survey shows that there is a positive relationship between financial planning and saving levels, with 44% of respondents globally claiming that they save more with a plan.

Among the Asian respondents who have taken professional financial advice, over 60% have saved more as a result, HSBC says. But there’s no avoiding that we’re all getting older. By 2050, there will be at least one Asian over 65 years old for every four aged 15-64, nearly thrice the number in 2001. The strong savings culture among Asians is a key advantage, but can only help so far, the bank warns.